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Filed by CheckFree Holdings Corporation
Pursuant to Rule 425 under the Securities Act of 1933
and deemed filed pursuant to Rule 14a-12
of the Securities Exchange Act of 1934
Subject Company: TransPoint LLC
Commission File No. 0-26802
FINANCIAL ANALYST AND PRESS CONFERENCE CALLS
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Call Date: February 16, 2000, Wednesday
TERRIE O'HANLON:
Hi, this is Terrie O'Hanlon, and I want to thank you
all for joining us. Leading the call today is Pete
Kight, CheckFree's Chairman and CEO. Ric Duques,
Chairman and CEO of First Data Corporation, and Lewis
Levin, who is both a vice president at Microsoft, and
President and CEO of TransPoint, also have prepared
comments. At the close of these, Pete, Ric and Lewis
will host about 20 minutes of Q&A. Pete Sinisgalli,
CheckFree's President and Chief Operating Officer,
also are available to answer questions during this
portion of the call.
Before we get started, I'd like to read our Safe
Harbor notification:
Certain of the Company's statements in this
conference call will not be purely historical, and as
such are forward-looking statements under the Federal
Securities laws. These include statements regarding
management's intentions, plans, beliefs, expectations
or projections of the future.
Forward-looking statements involve risks and
uncertainties, including, without limitation, the
various risks inherent in the Company's business, and
other risks and uncertainties detailed from time to
time in the Company's periodic reports filed with the
Securities and Exchange Commission. These SEC filings
include Form 10-K for the year ended June 30, 1999,
filed September 24, 1999, Form 10-Q for the quarter
ended December 31, 1999, filed February 10, 2000, and
Form S-3 Registration Statement, as amended, which
was filed January 14, 2000 and amended on January 21,
2000.
One or more of these factors have affected, and could
in the future affect, the Company's business and
financial results in future periods, and could cause
actual results to differ materially from plans and
projections. There can be no assurance that the
forward-looking statements made today will prove to
be accurate, and issuance of such forward-looking
statements should not be regarded as a representation
by the Company, or any other person, that the
objectives and plans of the Company will be achieved.
All forward-looking statements made during this
conference call are based on information presently
available to management, and the Company assumes no
obligation to update any forward-looking statements.
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Now I'd like to turn the call over to Pete Kight,
CheckFree's chairman and CEO.
PETE KIGHT:
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Good morning, and thanks for joining us so early,
particularly those of you that have joined us on the
on the West Coast. I know this came on short notice
and I do appreciate you giving us time.
Hopefully you have had an opportunity to read the
press release we issued after market close last
night, and have had a chance to understand the power
of CheckFree, First Data and Microsoft working
together to accelerate the rate at which consumers
sign up for electronic billing and payment. The first
step in our working together is the merger between
CheckFree and TransPoint, which as you know is a
joint venture between Microsoft and First Data, with
Citicorp as a minority investor. In addition to the
obvious strategic importance of this merger this is
actually a very good business day.
Each company has specific and complementary
strengths, each of which is important in igniting
consumer and biller excitement about receiving and
paying bills on the Internet. Stimulating demand will
drive this service to the "main street" statuses that
e-mail has today.
Here is the bottom line overall on what today's
announcement means:
(1) billers will be able to get electronic bills on
the 'Net faster, easier and better because we
will simplify the process;
(2) consumers will be able to get more bills, at
more places, including an array of Microsoft
Service Offerings;
(3) Consumer Service Providers will be able to make
more bills available to more consumers, more
quickly; and
(4) CheckFree will be able to expand its products
and services, with even greater scale and
processing efficiency.
This merger has significantly improved the electronic
billing payment services our financial institutions
will be offering. Banks will clearly have the lead in
being able to electronically serve both their
consumer and business clients. Those financial
institutions who offer electronic billing and payment
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services to their retail customers can distribute a
broader base of bills following this. They will
receive even better system quality and performance as
we expand use of First Data's extensive payment
capabilities. Including both this merger and our
pending Bluegill Acquisition, Financial institutions
that want to be Biller Service Providers will be able
to get in the game easier and much faster, with
significantly more services to offer their corporate
customers right out of the gate, marketed under their
own brand, and backed by the experience, scale and
ingenuity of CheckFree, First Data and Microsoft.
The terms of the transaction are covered in the
release, but I'll briefly review them with you.
- At the time the transaction closes, Microsoft,
First Data and Citibank will jointly receive 17
million shares of CheckFree stock. At
yesterday's closing price, that values the deal
at about $1 billion
- CheckFree will receive an exclusive five-year
relationship with Microsoft to provide
electronic billing and payment technology used
in consumer applications and services Microsoft
develops. During that time, Microsoft will
guarantee $120 million in revenue to CheckFree.
- CheckFree will also enter into a five-year
relationship with First Data, during which we will
market and use each other's products and services.
First Data will provide at least $60 million in
revenue and or cost savings to CheckFree.
- Subject to necessary regulatory approval,
Microsoft, First Data and Citibank will
collectively contribute $100 million to TransPoint
immediately before the transaction closes, and
those funds will immediately transfer to CheckFree
at closing.
- First Data and Microsoft will each gain a seat on
CheckFree's Board of Directors. We have selected
Ric Duques and Lewis Levin to take those seats.
I'd like to take a moment to review specifically how
we've agreed to work together:
- Microsoft will become a major online consumer
retail provider for CheckFree's electronic billing
and payment services, via Microsoft MoneyCentral
and other services that are not publicly disclosed
yet. Lewis will address Microsoft's plans further
just a little bit later in this call.
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- Microsoft is obviously a very strong brand of
consumers and businesses trust with their
important work every day, both at the office and
at home. And Microsoft is a worldwide leader at
creating technology that is familiar, easy and
very well supported. Since research shows trust
and ease of use are the two main factors that need
to be addressed to achieve the growth rate we'd
like to see, we are obviously thrilled with this
direction.
- Everyone involved in electronic billing and
payment is concerned about interoperability. Our
acquisition of BlueGill Technologies, which we
expect to close shortly, provides immediate
interoperability between CheckFree and TransPoint
and positions CheckFree as leading the open
interoperability push. Today's news obviously
means we plan to advance that dramatically,
simplifying the electronic billing and payment
model to accelerate growth and keeping
interoperability open and accessible.
- First Data is the largest payment processor in
the world. In an economies of scale business,
access to this infrastructure will be a
strategic advantage.
CheckFree can use First Data' broad range of
processing, settlement and electronic remittance
capabilities to further improve the
standard-setting quality levels we deliver
today. We also plan to explore ways to tap into
Western Union's domestic network of more than
4,000 billers.
- At the beginning of this fiscal year, I had
stated that CheckFree would begin to focus more on
business-to-business initiatives, and look for
ways to utilize our electronic billing and payment
service infrastructure to deliver a broad range of
products and services. Getting this deal done is a
big part of that. While we won't share specifics
today, Microsoft and CheckFree have agreed to work
together to develop electronic invoicing and
payment for Microsoft business-to-business
initiatives, and for future financial electronic
commerce services. We further expect to be able to
utilize First Data's payment solutions as a part
of these efforts. As you know, the
business-to-business electronic billing and
payment opportunity is at least as big as consumer
EBP, so we expect these efforts to lead to new
areas of growth for all the companies.
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- To advance ease-of-use and efficiency of electronic
billing and payment, we'll use technology from both
Microsoft and First Data. This includes Microsoft's
Windows NT and SQL Server in solutions we create for
billers. We have also already been adding Windows NT
and Microsoft BackOffice to the technology in our
data center, and will obviously continue to expand
that. We have also agreed to support Next Generation
Windows Services from Microsoft. Combined with First
Data's broad range of electronic payment
technologies, this merger should enable us to further
advance our processing efficiencies and our quality
initiatives.
Regarding international reach working more closely
with Microsoft and First Data, who are both
technology leaders world wide, we believe should
facilitate CheckFree's ability to expand
internationally. There is clearly opportunity to
utilize First Data's Western Union Agent Network of
more than eighty two thousand locations reaching one
hundred seventy six countries. First Data also has
key agent relationships with twenty eighty post
offices including German Post Bank and French La Post
for example that could further extend CheckFree's
international reach. TransPoint is currently helping
to develop an electronic billing and payment service
in Australia and also has a relationship with BCE
Emerges which is providing bill presentment
processing for a consortion of Canada's largest
financial institutions. CheckFree has developed an
electronic billing and payment solutions in New
Zealand and we will have sales and service offices in
Canada, Singapore and the United Kingdom through
Bluegill Technologies. Microsoft is the worldwide
leader in software for personal and business
computing. Microsoft had subsidiaries operating in
sixty nations around the world and has created and
developed products in more than thirty languages. We
obviously intend to use this transaction to
significantly expand our international reach.
I hope it's clear just how strongly each of our
companies is committed to accelerating use of
electronic billing and payment. I firmly believe
that, once the transaction is finalized, our teamwork
will have a catalytic effect on bringing billing
content to the Internet and on driving users to the
`Net to receive and pay bills.
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Now I'll turn the call over to Ric Duques to add
perspectives from First Data.
RIC DUQUES
Thanks Pete, I'll be brief because I know many of you
may want to ask some questions. From a First Data
standpoint this agreement will IGNITE THE MARKET for
electronic bill presentment and bill payment. The
combination of TransPoint and CheckFree will forge a
powerful alliance here. But let me define for the
listeners the market we're talking about. We're
talking about the traditional market place where a
biller prints a bill, puts it in an envelope, mails
it, the consumer gets it in the mailbox, opens it up,
looks at it, writes a check, puts the check in an
envelope, and mails it. That whole process is the
electronic bill presentment and payment market place.
That's the market place we're going after. There are
literally billions of bills that are sent to all of
us. So this has implications both to consumers, to
billers and to other parties like the post offices.
We believe that TOGETHER WE CAN ADVANCE AND GROW THE
SIZE OF THIS MARKET PLACE FASTER AND FARTHER THAN WE
CAN ALONE.
What this alliance does is it combines four very
critical things here:
1. A CRITICAL MASS OF BILLERS.
2. A KILLER APPLICATIONS and technology of enormous
functionality for both the biller and the
consumer.
3. SCALE AND TRANSACTION PROCESSING CAPABILITIES
because there will be billions of transactions
that will have to be processed here and through
the combination of First Data and CheckFree, we
are probably the largest payment processing
company in the world. And
4. The domestic connectivity to 4000 billers through
the Western Union service, and I'll talk a little
bit about that in just a second.
THE QUESTION FOR FIRSTDATA WAS: "HOW DOES FIRST DATA
USE THE POWER OF THE INTERNET TO GROW OUR BUSINESS
AND WIN IN THIS INTERNET ECONOMY?"
As a leading provider of electronic commerce
payments, our goal is to capture a growing share of
the electronic payments from point that they occur to
the point that they're settled.
- This alliance, this particular alliance,
dramatically increases our PROBABILITY OF WINNING
IN THE MARKETPLACE CALLED ELECTRONIC BILL
PRESENTMENT AND BILL PAYMENT.
It's clear, however, to us, that what has evolved
here the highly fragmented and competitive
marketplace.
- There are multiple approaches to handling
electronic bill presentment and bill payment.
Along with CheckFree, we believe that the integrated
payment system is the best solution for this
marketplace.
- We believe our alliance will benefit both the
billers and the consumers. It will create
confidence in the billers, and it will give the
consumers a more complete bill payment capability.
This market will therefore start to expand
rapidly.
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TWO THINGS OF VERY HIGH SIGNIFICANCE IN THIS
TRANSACTION FROM WHAT FIRST DATA BRINGS HERE IS they
recently signed agreement between TransPoint and
First Data, First Data's Western Union business, will
be transferred to CheckFree.
And in that agreement Western Union, which has 4000
biller relationships, those are relationships with
electric companies, gas companies, water companies,
local and long distance companies, where we provide
walk-in bill payment service. And we do OVER 105
MILLION walk-in payments.
- The significance of this is 300 of these biller
relationships that Western Union has are totally
electronic. So this will more than double the
number of electronic biller connections that Trans
Point and CheckFree have combined. The other
significance here is Western Union has
relationships with 28 post offices around the
world.
- And obviously from my definition of the
marketplace you can see this will have an impact
on the post office if everyone is doing electronic
bill presentment and bill payment. There'll be
less traffic there so the post offices will want
to be involved in this.
The second thing from First Data's standpoint is we
will be a major investor - over 6 million shares --
of CheckFree. And this allows us to align ourselves
with someone who will be one of the clear leaders in
electronic bill payment and presentment.
- Under the joint marketing agreement that Pete
talked about with CheckFree, we will utilize First
Data's payment systems, its settlement systems and
electronic systems to help CheckFree grow this
business.
We have a strong commitment to the Internet. This
agreement will give us the opportunity to be a major
processor of electronic payments made over the
Internet for consumers who want to pay their bill in
that manner.
Now I'd like to turn the call over to Lewis Levin and
let him talk to you a little bit about Microsoft's in
view of this.
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LEWIS LEVIN
Thanks very much Rick; also thanks Pete. I'm just
gonna give a little perspective from Microsoft's
standpoint and then we'll quickly get to questions.
- At Trans Point we've worked harder the past three
and half years to develop new technology for bill
presentment and payment from the ground up. I think
that this merger opportunity recognizes some of the
value for what we've created.
Right now there are 32 e-bills that are payable on
the TransPoint system, representing 20 companies.
- We have signed contracts with 40 of the
country's largest billers and we're working with
20-30 more.
- Pete mentioned that we`ve made some significant
strides in working with major organizations in
Australia and Canada.
- Just two weeks ago on February first, we
released the fourth version of our system that
included to pay anyone offering email notification
and a new user interface. We also kicked off a
multimillion-dollar advertising campaign to
educate the market and recruit consumers to
electronic billing and presentment.
- The merger today is fabulous news for advancing the
industry. I think it's going to have a huge impact on
accelerating the growth of the industry because it's
gonna make a more compelling offer for billers,
consumer service providers who are the very
institutions that offer a billing payment service to
their customers on the web and of course to
consumers.
I think we're gonna provide some clarity for
billers in terms of the models to use for
electronic billing and payment; they'll get the
best of the combined technology that CheckFree
and Trans Point can offer; they'll be able to
rely on CheckFree's existing service
infrastructure; and they'll have access to the
broadest distribution to consumers for these
services. The consumer service providers that
provide this kind of capability to their
customers are gonna get the benefit of additional
bill content. Much of the growth of this industry
is predicated on really streamlining the process
for consumers so that they cannot only pay
on-line but they also receive on-line, so acces
to content is a huge factor here. Consumers, of
course, are gonna find this a much more appealing
offer because of those benefts. What Microsoft is
gonna do is to very aggressively focus on
expanding our offer to consumers for these
services. We'll create unique Web capabilities on
MSN and Money Central using the service
intrastructure that CheckFree provides to us.
We'll also integrate payment and billing
capabilities in next generation Windows services.
For us, this is a great opportunity to focus on
Microsoft's direct customers. I think the
technical collaboration between our companies is
a really big win. Clearly, we're pretty
conspicuous in wanting to promote Windows NT for
serious transaction processing and data center
applications, and I think this will a great
opportunity to advance NT and those applications.
I'll be serving on CheckFree's board of
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directors and I'm looking forward to that, and I
think we have a great opportunity ahead of us.
We're very committed to the growth opportunity in
this business. That's if for me. Pete.
PETE KIGHT
Thanks, Lewis. Everyone has heard the commitment each
of our companies has to making this happen. You also
should understand that each of us knows there is
still a lot of work to be done. Fewer consumers than
what we would like are receiving and paying bills on
the `Net. We clearly understand that this marketplace
is set for acceleration. For every consumer that's on
the net paying their bills, we believe there are 10
consumers who are intending to do it, who expect to
do it, who actually tell researchers they're ready to
do it, but have not yet pushed the button to enroll.
With more than 50 competitors in this space, we will
have to stay focused to make sure we're the ones to
get those consumers to click and go. But we had to
execute, and will have to execute first, on the
things that need to happen. Here's what we're focused
on:
Simpler enrollment. Very broad and ubiquitous
distribution of a wide array of bills. INTERACTIVE
billing content that delights the consumer with even
more than the sheer ease of getting and paying bills
on the Internet.
In the very near future, bills are not going to be
just something you pay. They will be channels to
getting better
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customer service, and building relationships with
companies that create products and services just for
you, because an intelligent billing process knows
what you prefer, when you prefer it, and where you
prefer to receive it
Again, let me restate. There will be channels to be
getting better customer service and building
relationships with companies that create products and
services just for you.
CheckFree, Microsoft and First Data share the vision
for how powerful electronic billing and payment can
be in helping companies to create excellence in
customer service. Each of us understands how large
the impact of electronic invoicing and payment can be
on business-to-business applications. We know that
technologies from each of us, when combined, can put
electronic billing and payment on Main Street, making
it common in Internet-connected households and
businesses. We also share a mission of making it
happen, evidenced by our decision to merge CheckFree
and TransPoint.
As we play to win, our network of financial
institution partners wins as well. We expect
financial institutions to move aggressively to the
Internet to take advantage of this larger opportunity
to make a broader, easier-to-use and easier-to-scale
electronic billing and payment service, delivered
under their brand to consumers and corporate
customers.
Electronic billing and payment is going to be a
ubiquitously available as e-mail is on the Net.
Consumers will have the opportunity to review their
bills and billing statements at just a click from
anywhere on the Web that they choose. Customers, both
consumers and businesses, will now be able to be only
a click away from detailed customer service through
whatever Internet connection that they choose. And we
believe that this transaction, the merger of
CheckFree and Trans Point, is going to be a catalyst
in making that ubiquitous availability just a click
away.
Now I'd like to open it up to questions, if anyone
has questions for either Ric, Lewis or myself, we'll
be able to take them now. Operator.
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